budget control act that we passed last year that required 60 votes? >> absolutely. >> that's different than a budget resolution. a budget resolution requires only a simple majority. but a budget resolution never goes to president for a signature. >> right. >> last year, we passed a budget control act that's a law. that passed not only the house and the senate, and of course, required 60 votes in the senate, but was signed by the president. it's the law. let me ask one other question f i could, because i'm running out of time. the hard reality here is budgets and what we do with fiscal policy is linked to the economic outcomes that this country experiences and if we look back at what this president walked into, isn't it true that the

economy was shrinking at a rate of almost 9% in the final quarter of the previous administration? >> yes, it was. >> isn't it a fact that the economy is growing at a rate of 2.5%? >> yes. >> that is a turn around that's really quite remarkable from the economy shrinking at a rate of 9% to an economy growing at a rate of 2.5%. i believe the president deserves some credit for helping engineer that turn around. the same is true with respect to jobs. isn't it true that in the first month of 2008-2009, we lost 800,000 jobs in the private sector? >> unfortunately, yes. >> that wasn't a result of this president's policies. he did not take office until

two-third of the way through that month. now in the most recent monthly report, we gained 250,000 jobs in the private sector. suspe isn't that the case? >> yes. >> so, it appears to me the president should be able to ask the american people to support a policy that has brought us back from the brink. i assume it's his intention with this budget to try to further the economic recovery and further help create jobs in the private sector. is that the underlying strategy? >> i think you captured it well in your opening statement. it is a two-step. to make sure we continue the recovery starting with the extension of the payroll tax holid holiday. doing the types of investments. the $50 billion you mentioned in

infrastructure and to modernize our schools. and at the same time put ourselves on a path of deficit reduction. by 2018, the debt of the gdp has stabilized. coming back to the figure for 2014 you mentioned. by 2014, we are down to 3.9. that is not where we want to go, but better than the 10.5 you referenced that the president inherited up front. >> thank you. we will do five-minute rounds this morning. hopefully we will get to a second round. senator sessions may consume the time i did. >> thank you, mr. chairman. putting us on a path to deficit reduction, some time in the future, we'll have deficit reduction is not achieving deficit reduction. and the president surged spending the first two years of his time in office, which the

chairman didn't refer to when he talked about how much growth of 62% would include. it would be a lot more if you include the surging and stimulus and the 24% increase in two years in discretionary non-defense spending. but i would say that mr. lew, on his cnn program, said you can't pass a budget in the senate of the united states without 60 votes. mr. zients, isn't it true that the current law which included the budget control act, the legislation that passed as part of raising the debt limit, that your budget spends more money than congress proposed to spend through the budget control act process over the next ten years?

>> as i showed earlier, we have $5 trillion deficit reduction. >> you proposed to spend more money over the next ten years than the budget control act current law would cause us to spend. >> i think we have a much more honest baseline. a baseline with sgr, amt, not patched year over year. >> you don't way for the sgr, that's not paid for. let's go back to the simple question i ask you. does your plan spend more money over the next ten years than the agreement in current law that we reached just last august? >> the baseline -- >> yes or no. >> i think we have to focus on the bottom line and we're taking deficits down to 2.8% of gdp. >> you are not answering my question. you are the director of omb.

>> the budget is a more honest budget that looks at what's happening in a business as usual. each year we are passing the amt. >> the witness is not answering a simple question. >> it is a more accurate reflection of what we're going to spend. >> will it spend more or less? >> it will actually spend less money because of the deficit reduction we have and the baseline of the reflection of the current policy. >> because of the deficit reduction that is caused by increased taxes. let's would back to the question. your budget proposes eliminating the sequester, the $1.2 trillion in spending cuts we all agreed to last year, difficult as it was, that's a $1.2 trillion

increase in spending, is it not? >> no, it isn't. >> why is it not? we agreed to current law to cut reduced projected spending rate by $1.2 trillion. you eliminate that. that means you intend to spend that, do you not? >> this is a very important point. the president is not proposing that the sequester go away. the sequester is a very important forcing function for us to do deficit reduction. so the sequester will be replaced with a balanced approach to deficit reduction. >> you are replacing the sequester? >> it is bad policy. the sequester is bad policy on the defense side. >> your budget increases spending by $1.5 trillion more than the budget agreement last year and it is in a lot of different places. you make cuts in some places out there, but your net is to

increase spending more than the current law and that is not the path we need to be on and the increase in taxes you propose, almost 2 trilli$2 trillion, is pay for that. >> there will be $2 trillion of deficit reduction from the bca. you brought up taxes a few times. we believe in a balanced approach. >> let me ask you this. if you are incorrect in saying that you do not increase spending more than current law, would you consider resigning your office? >> let me go back to the balance -- >> we looked at the numbers. are you that confident? >> i'm confident with our baseline which accurately reflects current policy that we have deficit reduction in dollars. we do it in a balanced way. for every $2.50 of spend cuts,

there is $1 of revenue. >> mr. zients, there is no spending cuts in this budget! this budget increases spending! surely you know that. it increases taxes. so to say you cut $2.50 in spending for every $1 in tax increase is beyond the pail. >> we have $260 billion of cuts. we have savings from oco. the cbo scores. in total, it is $2.50 of cuts to $1 of expense. >> mr. chairman, this budget taxes more and it spends more. it does not alter the debt course of america. i am disappointed that we can't

get an honest response to these difficult questions at this point time in our history. >> i thank the senator for his questions. senator murray. >> thank you so much for your service to our country. we all appreciate it in this difficult time. you know, as we all know budgets are about choices and priorities. they are making investments in our families. they are tough decisions in how we reduce our debt and deficit. spent a lot of time on the committee. i think our work really highlighted the deep divisions on issue and the contrast with the parties on the path forward today. i feel strongly that deficit reductions shouldn't simply be put on the backs of the middle class. i think the wealthy americans

and corporations should contribute their fair share as we work out of this. i do believe that we need to cut where we can and we all need to remember we have, including $1 trillion that we cut in the budget control act. a balanced approach is what every group that has tackled this has advocated for. so, as we work on the potential changes to the bipartisan he sequestration process, i believe we cannot do that. i believe the fair way to change the process is through shared sacrifice and balanced approach. it is that important budget value, balance, that i want to start off today in asking you about the president's budget proposal. how does your budget tackle this issue of balance and fairness for the middle class and what

are your specific proposals to make sure as we tackle the goals and jobs in the future and deficit reduction, we are calling on everyone to share? >> i think you are right. the balanced approach has been central to everybody's recommendation here, including the simpson-bowles. asking the wealthy americans to pay their fair share, that $1.5 trillion comes from that and from ending some corporate tax loopholes and unnecessary corporate tax expenditures. asking everybody to pay their fair share, raising revenue is a send central part of that. at the same time, there will be no tax cuts for the middle

class. no family earning under $250,000. increases. i'm sorry. there will be tax cuts. we also are -- >> for those listening and we use these acronyms here. >> the american opportunity tax credit allows families to get up to $10,000 of tax relief for college. and making college affordable is essential in the budget. continuing pell grants at the higher level. giving the tax credits i just described. encouraging colleges and universities to stop their year over year tuition increases. all important for the middle class. the president has done about $300 billion of tax cuts for the middle class. so central to this budget is a balanced approach. i talked about the $2.50 of

spends cuts for every $1 of revenue. making sure the wealthy americans do their fair share and making sure we give the middle class a fair shot. >> i thank you very much for that. i think it is really important for america today. some many families have been hit hard in the last two or three years with the house prices going down and the jobs cut. we need to get the economy back on track. we need a fair and balanced approach. i appreciate the president's emphasis on that value. i did want to ask on the issue of sequestration. the va is due with cuts. i'm concerned that by not settling this issue now, we're failing to provide our veterans today with the clarity they deserve. i wanted to ask you what can we expect and when can we expect omb to weigh in on that issue?

>> first of all, i want to emphasize this year's budget recognizes the importance of our veterans and veterans families. >> i thank you for that. >> in terms of the sequester, it is bad policy. it is bad policy all around. it would lead to cuts on the defense side that go across the board or indiscriminate totaling $500 billion. we have similar cuts of similar magnitude on the discretionary side. overall, the sequester is bad policy. we are focusing on replacing that with balanced deficit reduction. if, unfortunately, we need more issues for the sequester, we will focus on the issues you raised. >> i appreciate that. as soon as you can let us know, we appreciate it.

>> will do. >> thank you. senator crapo. >> thank you, mr. chairman. i want to go back to something that was brought up here. it is not time yet to start controlling the spending side of the equation. we still need to stimulate the economy. we need to keep the government spending going to generate jobs. the two-step approach that the chairman mentioned and you have confirmed is the approach taken by the budget. i have a concern about that. as you know, i'm sure i served on the president's commission on the bowles-simpson commission. that adodopted the same two-ste approach in 2010. we agreed in the commission report that we would delay the caps on spending and the spending restraints for a year or two to allow for the stimulus

on the impact on the economy that was claimed to be needed. the concern i have that it's now time to prepare the 2012 budget. we still hear that it's not time yet for us to begin the austerity part, but we still need to engage in the spending side. we are not there. my question rhetorically, when will we ever get to step two? the question i want to ask you is about this budget. i have seen a lot of budgets in congress. i analyzed a lot of congressional budgets. one of the biggest problems i think we have that we overlook every year is that you have a budget in this case, a ten-year budget, that makes all kinds of proposals over a ten-year period of time, but it is only the first year of the budget that really counts. it is only the first year of the

budget that congress will operate from in this year. it seems that in the first year of almost every budget i have seen congress establish, there is just more taxing and more spending, but the control of spending doesn't happen. and i note that is happening in this budget. this is the question i want to refer to you. two years ago, the president's budget claimed billions in savings by freezing none security discretion spending at $446 billion. one year ago, the president in his budget proposal, claimed additional savings in the same category for 2013, saying in fiscal year 2013, we should get to an even lower level of $397 billion. now we're looking at fiscal year 2013. it's arrived. and the president proposes not

the 446 that he said in the budget two years ago and not the 397 he said one year ago, but 501. if i read the numbers correctly. and so, the same dynamic that is occurring has happened again. in previous budgets, we say in the future, we'll fix things. here's how we'll fix them. then we get to the future budgets and lo and behold, the fix is gone and the spending is back in place. could you respond to that? >> i think that on the discretionary side, we are abiding by the bca caps, which as you know, controlled spending. if you look at dod as example. put together a budget as a strategy. that results in a 1% decrease in

dod spending. not counting oco. with counting oko. if you look across agencies, beyond dod, half of our agencies have flat or negative spending, in 13 versus 12. this is a budget that i would argue has a lot of spending control and at the end of the day, the bottom line as i mentioned earlier is that we're down to -- in 2013 to 5.5% of gdp and then in 2014, 3.9% of gdb. significant progress not where we need to go. we need to get the deficits lower. we need to have debts stable as a percentage of gdp, but we're on the right path of this budget. >> but you have adjusted the base line which allows you to make the claims that you're making in a number of contexts here. let's forget about the base line. let's forget about the percentages and all of the arguments that have been made about how we're going to be reducing percentages of

spending. is it not accurate to say that the president proposes in this budget for 2013 more spending than he proposed for this same 2013 budget last year and the same 2013 budget the year before. >> i think you have to go back and benchmark those numbers. i don't have them in front of me. what i can tell you, this is a tight budget and certain a the caps which makes -- has us making a lot of tradeoffs. i think the most powerful data -- >> except the sequestration is eliminated -- >> i want to be very clear on the sequestration. it is not eliminated. the president believes that it's a very important forcing function. in the fall congress was not able to come up with a proposal. >> i think your word was replaced. >> well, it -- the 1.2 trillion that the sequestration would create through what we think is

bad policy, in the dod area, an across the board cut on top of the efficiencies we have already realized is bad policy. and a -- it would be replaced with balanced deficit reduction. we will have that 1.2 trillion. it is mutually assured destruction. no one wants the sequester -- >> but with the 1.2 trillion tax increase? >> a combination of tax and spending cut. >> well, i can tell you i do have the numbers and in two years ago it was 446. one year ago it was 397. this year it's 501. the same thing is happening. the budget proposals go up in the year that we really are doing the budgeting. >> let me just say that i have served with senator craypoe on the fiscal commission, group of six, i have spent hundreds of hours with him. he's a serious person and in the

group of six, we devised an enforcement mechanism that's never been used before. in part to get at the issue. the underlying issue that he raises. which i think those of us who served on the budget committee for many years whatever the merits of the current budget or the demerits of it, the underlying dynamic that he is stressing here, he's stressed in many, many hours i can tell you on the fiscal commission and the group of six. and he's right that enforcement mechanisms have almost always had loopholes in them. i'll tell you congress is genius at getting through loopholes. >> mr. chairman, i appreciate you saying that. i wrote the gang of six enforcement mechanism on my pad here, because i would love to see the president endorse that much of the work we have done here. >> i would say that that gang of six proposal, the strength of it

was good enforcement and one of the things we know if you pass a sequester that requires a $1 trillion reduction and you waltz into the congress less than a year later and propose to eviscerate it, it does not give confidence in anything we ever do would be followed through. i know what you're suggesting. but you have other cuts and i know you have other tax increases but you have walked away from those cuts and replaced them with fundamentally tax increases as the senator just said. >> well, i don't think we have seen a specific proposal to -- as to how achieve the 1.2 trillion that is anything other than the sequester itself, which is bad policy. i think we could all agree that's bad policy. what we're proposing here is to replace wit a balanced approach and the president's budget has more than the $1.2 trillion of spending and revenue to replace

the sequester. but i want to be crystal clear, the president believes the sequester is very important as a forcing function to make sure that we achieve at least that level of deficit reduction. >> we can't ad hoc this. senator cardin is waiting senator cardin? >> thank you, mr. chairman. i think we can learn from our past experience, mr. chairman. and that is in the 1990s, when we had a serious budget problem, we had a balanced approach to deal with it. we enhanced revenues, we did for deficit reduction and we reduced spending. and we were able to get our budget not only under control, we got our budget balanced. we saw economic expansion in this country in job growth and everyone benefited from that. so i think the chairman's exchange with the director as to getting our budget deficit manageable should be our goal.

and if we can in fact reduce the deficit by one half as a especially of our economy, that is progress. that is real progress that's being made and that will be reflected in the growth of our economy and we'll all benefit from it. so i think that's an extremely important point. i appreciate the fact of how you are trying to balance the revenues and the spending over this period of time. i want to talk about the revenues for one moment because i understand that there's going to be a lot of comment about it. but if we were to use current law, as it relates to revenues, the previous tax cuts, allowing them all to expire and not extending the alternative minimum tax, what would be the revenue impact versus what you have in your budget over the ten-year window? do you have those numbers? >> i'm sorry, sir, you're suggesting if we were to allow

the middle class tax cut. >> i'm suggesting if we were to compare this to current law rather than -- if we were to allow current law to take effect, rather than continuing current policy, as it relates to the revenue issues. >> right. i believe cbo has done that, that work. we don't spend time on that because we believe that no family with less than $250,000 of income should have any tax increase in fact we believe there's opportunity for further tax cuts. we believe that the tax cuts should expire for the wealthiest 2%. that's central to having this balanced approach. >> i support you on that. i think the point senator murray made about the middle class is important. the middle class needs help and they need help as far as the amount of taxes they pay. they need help on college expenses and i strongly support what the administration is trying to do and continuing the

pell grants, hopefully expanding the pell grants. my point is this, when we look at the revenue number it's my understanding that the revenues that you're bringing in would actually -- if we allowed current law to take effect, we would actually have more revenue coming into the treasury than what the president's budget is proposing. >> absolutely. >> i agree. none of us want to see that happen, but i think the point is this. that we need to come together in order to make sure that our tax policies are sensible. we'd all like to see reform, but the revenue part of what the president has in his budget is actually less revenue coming into the treasury than if we were to allow current law to take effect. >> that's right. it returns us to a point for that -- for the wealthiest 2%. that brings us back to the period of time you were talking about in the '90s, tax rates would be very similar. having been in the private sector during that period of time, i can tell you that there's plenty of incentive to

be an entrepreneur, to grow a business, to make investments and it's central to this balanced approach that we have an appropriate amount of revenue. that 1.5 trillion allows a balanced approach. i think it's good for america. good for the middle class. >> i would just add one more lesson from the 1990s when we were able to get the budget under control and actually have a surplus. we gave predictability to the private sector. that they knew that they had confidence that the budgets would be there. and that government policy would be there. again, it allowed for the expansion of our economy. i think it's critically important that we act, that we don't let current law take effect because of the impact it has on middle income families. but i think the president has given us a balanced approach. learning from history i think if we allow that to take effect we'll see the type of progress in our economy that everyone will benefit from. i think that's what we're all trying to do. >> i think we need to